Banks fail to provide adequate service to customers in India

In March 2025, banks in India have accumulated around ₹103 lakh crore ($1.2 trillion) in fixed deposits, indicating a significant amount of funds available. However, in stark contrast to their financial health, the banks have faced increasing scrutiny over their lack of attention to customer service. In the past two years, complaints directed to the Reserve Bank of India (RBI) have surged by 50% each year, indicating a growing dissatisfaction among customers regarding the services provided by banks. During a recent statement, RBI head Sanjay Malhotra criticized banks for their unsatisfactory handling of customer grievances. This outcry comes after banks reported receiving over 1 crore complaints in the 2023-24 period alone, with many issues being disguised as “requests” or “queries” rather than marked as formal complaints, a violation of existing regulations. The rising complexity of customer issues has also come to light, with complaints shifting from basic clerical errors to more serious problems, such as clients losing credit scores because of banking mistakes, making access to loans more difficult. The situation has escalated further with banks reportedly pressuring customers into unnecessary financial products, like investment plans and insurance, instead of focusing on core banking solutions. There is also an alarm regarding how loans are processed, with various key areas such as gold loans and unsecured loans being flagged. The banks have not heeded warnings about their cautiousness regarding loan approvals despite serious regulatory concerns. Additionally, investigations by the Supreme Court of India into various scams highlight a troubling pattern with banks, including a case where home buyers have been paying Equated Monthly Installments (EMIs) on homes that do not physically exist. This raised serious legal questions about the legitimacy of disbursing such significant amounts of loan funding without appropriate groundwork laid. The Supreme Court queried how 60% of a loan could be released before any construction began, illuminating the depths of the issue at hand and emphasizing a need for greater accountability within the banking sector in India.